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Let to buy mortgage lenders and criteria

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 12, 2022

Let to buy mortgage lenders and criteria.

A let-to-buy mortgage may be the best option if you want to buy a property and keep your current home.

Enquire here and speak with a mortgage broker to learn more about a let-to-buy mortgage. Or call to speak with one of our expert brokers.

Our experts are all whole-of-market brokers and have access to lenders throughout the UK. We will match you with a mortgage broker with experience in arranging buy-to-let mortgages for satisfied customers.

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What is a “let-to-buy” mortgage?

You can keep your current home and let it out to tenants while purchasing a new one. Although it’s similar to a buy-to – the main difference is that you are not purchasing a property to rent. Instead, you’re purchasing a new home while renting your existing house.

A let-to-buy agreement often includes two mortgages due to its nature.

  1. Buy-to-let mortgage for the property that is being used as a rental
  2. A residential mortgage is required for the new property.

It is also common for borrowers to release equity of the property to, to be used as a deposit on the new house.

This is a good option in many cases. Let-to-buy is a good option for couples with their own homes when they get together. This allows them to live in both of their homes and let the other one.

You might also be looking for a job or are struggling to sell your home. A let-to-buy mortgage allows you to move into the new area and generate rental income.

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What is the difference between buy-to-let and let-to-buy mortgages?

Both mortgage types can be used to rent out properties, but each works differently.

Lend-to-buy mortgages can be used by borrowers who own a home but wish to rent it out to tenants.

Buy-to-Let Mortgages are available for those who intend to rent a property for an income stream.

Many let-to-buy mortgage agreements allow you to simultaneously take out two mortgages from the same provider. If you want to get the best deal, it is possible to have two mortgages from different lenders.

Many borrowers looking to get a let-to-buy mortgage will use equity from their home to pay down the deposit on the house they want to purchase.

Let-to-buy mortgage – also known as. After moving into your new home, you will need to seek a new deal on the property you converted into a rental accommodation. Most UK lenders would treat the new house purchase as any other mortgage application.

Get in touch if you have any questions regarding let-to-buy mortgages or want to arrange one.

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What are the lending criteria?

Many mortgage lenders will only lend to borrowers who meet strict criteria.

When assessing your application, let-to-buy lenders will consider the following:

  • Your age
  • The amount of equity or deposit
  • The monthly rental income
  • Affordability
  • Credit history
  • Other factors

Age limits

Most lenders won’t lend to borrowers younger than 25 years old or over 75.

Some specialists can offer mortgage deals that let you buy to customers who do not meet these criteria. Our expert advisors can help you identify them and determine if you are eligible for other loan options.

Send an enquiry to receive a no-obligation, free chat.

How much deposit do I need?

Most let-to-buy lenders will require a deposit or some equity. This is usually around 25%.

Providers will often require the same deposit to let-to buy as they would for mortgages. This would be between 20-40%, but some lenders will accept lower deposits.

Some lenders will require a higher deposit to purchase the property. They also have a cap on the new purchase loan rate at 80%. This means that you will need a minimum 20% deposit. In certain circumstances, lenders may lend up to 90% or more.

We’ll match you up with one of our expert mortgage brokers to help you determine how much deposit you may need for a let-to-buy mortgage

Monthly rental income

Only mortgage lenders will approve this product if it is financially viable.

Your mortgage provider will establish a minimum monthly rental income requirement for houses that are let-to-buy. You will need to rent more than you pay in mortgage payments. To ensure you can get the best rent possible, you will need to determine how much you are allowed to charge for the property.

Lenders will consider rental income equal to 125% of the monthly mortgage payments.

Get quotes from at least three local agents to find out what your monthly rent should be. This information will be required to support the affordability analysis. It’s important that you feel confident about the quotes you receive.

Lenders may differ in how much rental income they need to see relative to how much they borrow.

Talk to one of our expert brokers to ensure you get the best mortgage terms. They are familiar with all mortgage providers and can help you find the best deal.

For a confidential, no-obligation chat, enquire here.

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The affordability check will be part of your let-to-buy process to ensure the investment is feasible and that you can service two mortgages.

Your lender will ask for proof of anticipated rental income from an ARLA-registered agency.

Many mortgage lenders also require a minimum income, usually around £25,000. However, some mortgage providers may be willing to grant loans under these circumstances if you have the necessary salary to pay the outstanding mortgage amount.

Let-to-buy UK mortgage lenders are required to conduct a credit check on all applicants. Clean credit history will ensure that you meet the eligibility criteria.

Specialist lenders can assist you if your credit score is not good.

Maximum loan amounts for a mortgage will vary depending on the lender. Most lenders will offer 4x income. However, some will offer 5x income, and a few will stretch to 6x in certain circumstances.

This is the exact income figure for regular mortgages. Lenders use a variety of basic salaries and additional incomes such as bonuses and commissions.

There may be different requirements for self-employed mortgages, trading style, turnover, profit, and dividends (if LTD).

Send us an enquiry to get the best advice and determine your financial ability to purchase both properties. We’ll forward you to one of our expert brokers.

Can I get a mortgage let-to-buy with bad credit?

The borrowing criteria for a let-to-buy mortgage can be more stringent than those of mainstream lenders, as it includes both residential and rent-to-let components.

You might not be eligible if you have any of these against your name:

  • Late payments
  • CCJs
  • Defaults
  • Debt management plans
  • IVAs
  • Bankruptcy
  • Repossessions

The good news is that brokers are more open to helping borrowers with these issues and have a solid track record in negotiating loans to buy niche situations. However, success often depends on how long the customer has had adverse credit.

To learn more, visit our page on buy-to-let mortgages for customers with credit problems. We will introduce you to one of our brokers. We will introduce you to one of the brokers we work with. They are all whole-of-market experts and have access to all UK mortgage lenders.

Other factors

Many lenders won’t offer a mortgage to let-to-buy with no purchase on the horizon. Most lenders require you to live in your home for at least six months. This is usually anywhere from one year to one year.

Contact us if you are unsure if you meet the lending criteria for a let-to-buy mortgage or if you have been declined for any other reason. We will help you find a lender that suits your needs and match you with whole-of-market advisors.

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What is the maximum amount I can borrow?

The average loan-to-value rate (LTV) offered by UK mortgage lenders is approximately 75% on let-to-buy mortgages. Some lenders offer a slightly lower rate of 70%, while others provide a higher rate.

Under the right circumstances, specialist providers may be able to offer services up to 80% and as low as 90% for a few.

Lenders will typically limit the amount they will lend, usually between £500,000 to £600,000. However, specialist providers will loan much more if you complete the eligibility or affordability checks.

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Get the best UK let-to-buy rates

Many variables can impact the rate of your let-to-buy mortgage.

  1. How much equity/deposit do you have? Let-to-buy mortgage brokers are likelier to recommend borrowers with a substantial deposit or large equity to get a favourable loan-to-value (LTV) ratio.
  2. Your age: Borrowers’ age impacts the rates they are eligible for. The younger you are, the more you can borrow. Although many lenders won’t lend mortgages to people over 75 or to those under 25, some specialists do not impose such restrictions.
  3. The income type. Some providers may not consider income forms such as commissions, overtime, bursaries, and state benefits. Self-employed applicants are also a concern. Some are more flexible than others, but the higher your income, the better rates you qualify for.
  4. Your credit history. We’ve discussed how adverse credit can affect a let-to-buy remortgage request, but it is essential to remember that not all lenders are equally troubled. The rates you will likely qualify for will be higher if your credit history is older.

It is essential to compare the rates of let-to-buy mortgages from different lenders if you have adverse credit.

Stamp duty fees

It is important to consider the extra costs of a let-to-buy mortgage when deciding whether it is the right choice for you.

Due to the 2016 stamp duty changes, homeowners will have to pay an additional 3.3% for second properties. A £200,000 house for which you have a let-to-buy mortgage will come with an additional bill of £6,000.

The government will reimburse the additional 3% if your property is sold within three years after you purchase a new one.

Alternatives to let to buy

You may want to rent out your property and live elsewhere if you are looking for a mortgage to let to buy.

There are also other options:

  • A buy-to-let (BTL) mortgage. If you have two mortgages, it may sound less than ideal. Remortgaging your home as a buy-to-let mortgage and then moving into rental housing might be an option. Provided that you meet the BTL criteria of the lender, More information is available on our buy-to-let mortgages page.
  • Consent for letting: Your lender may grant permission to let your property while you buy elsewhere or rent a place. This may be possible for those who plan to rent their home for a short time.
  • Second charge mortgage: This is a secured loan against your home and is commonly used by homeowners looking to borrow money without remortgaging. This is a mortgage that you add to your existing mortgage. The equity it unlocks can be used to purchase a second property. You may be able either to purchase the property in cash or make a larger deposit if there is enough equity. This will depend on which terms you are eligible for.

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Can I get an interest-only let-to-buy mortgage?

Yes! The buy-to-let component of a mortgage to let-to–buy will usually be offered on an interest-only basis. Some lenders might be willing to provide you with an interest-only residential deal if you show that you have a repayment plan.

Acceptable repayment plans include:

  • Pension funds
  • Endowment plans
  • SIPPs
  • Bonds and ISAs
  • The sale of another property
  • An investment bond
  • Cash savings
  • Unit trusts

Some lenders may not be able to accept all the above, and rates offered by lenders will vary depending on the type of loan plan that you have.

We can help you determine the type of mortgage you are eligible for by talking with you.

Talk to an expert

The above options might not be the best option for someone in your situation. Get in touch with us to have the whole-of-market mortgage experts make a comparison and recommend the best course.

We have direct access to all UK mortgage lenders. They are happy to answer any questions you may have and to help you understand the various options.

We offer a free service with no obligations.

To speak to someone about getting the mortgage that you desire at the best rate, call or submit an enquiry.

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